See I like to pretend that AC was just a fan fiction and not cannon so in my world Tseng does die.

The confusion came from a mistranslation. On the PS Elena accusing Cloud of "doing in my bis" but in the Japanese version it is said he lived. It's corrected again on the PC version where Elena says "you messed up my boss".

I think the story works out better with Tseng dead as it makes his final meeting with Cloud's group and his scene where he offers to take Elena out for dinner more poignant and sad. Plus it gives Sephiroth an extra frag.